In the long-running Halliburton securities litigation, a dispute has arisen between two rival class proponents. While readers of this blog are no doubt familiar with The Erica P. John Fund, Inc. v. Halliburton Co. case and its twotrips to the Supreme Court, there is also a companion case, Magruder v. Halliburton Co. Both cases were filed in the United States District Court for the Northern District of Texas, and both cases deal with various misrepresentations allegedly made by Halliburton and its CEO, which allegedly harmed the value of stock owned by the class members. The alleged class period in the Magruder case runs from December 10, 2001 through July 24, 2002, while the Erica P. John Fund case covers an earlier period, July 22, 2009 to December 7, 2001. Disputes between the two classes have led the proponent of the Magruder class to bring several motions attempting to consolidate the cases and scuttle a potential settlement between Halliburton and the class led by the Erica P. John Fund (the “Fund”). After the Fund revised the definition of “Released Claims,” the court has preliminary approved the settlement despite the objection.

The deadline for parties to object to the settlement in the In re Credit Default Swaps Antitrust Litigation, Master Docket No. 13-MD-2476 (DLC) in the Southern District of New York recently passed on February 29, 2016. Unlike in most cases, where parties typically only object to settlements to the extent they allocate attorneys’ fees, several potential settlement class members to this litigation (“CDS Litigation”) have made specific, substantive objections to the potential distribution of settlement funds. In class plaintiffs’ (“Plaintiffs” or “Class Plaintiffs”) memo of law in support of approval of the settlement, Plaintiffs responded forcefully to these objections. Although Judge Denise Cote has yet to decide whether to approve the settlement, it is worth examining these new objections, which may suggest a trend in class-action settlement objections—at least in antitrust cases relating to securities transactions—moving forward. In addition, Plaintiffs’ heavy reliance on experts to create a settlement model may reflect another trend worth keeping an eye on.

A Magistrate Judge for the United States District Court for the District of Massachusetts recently issued a Report and Recommendation (“R&R”) on the Lead Plaintiffs’ Motion for Final Approval of Class Action Settlement and Plan of Allocation in Hill v. State Street Corporation. The recommendation contains language that is useful to institutional investors, as it enumerates what constitutes adequate class representation and proper notice to potential settlement claimants in complex litigation matters. The presiding judge adopted the R&R on January 8, 2015.

In the context of our representation of institutional investors, our experience reveals that they have been confronting an increasingly difficult process in recovering their losses from alleged violations of securities laws. These are among the developments:

The Morrison decision has insulated many large companies in which investors have sustained losses from Federal Securities Laws claims. While certain avenues to seek redress in foreign jurisdictions have improved, there are still obstacles in many foreign jurisdictions. Alternatively, filing a separate action in U.S. courts – without the benefit of Federal securities claims – has its own set of issues.

The claims process itself has become more adversarial. Electronic filing has enabled claims administrators to be more diligent in rejecting claims or challenging claims for deficiencies. Deadlines have become tighter. Failure to cure deficiencies can substantially reduce the value of a claim if not eliminate it. In addition, counsel for defendants are sometimes participating in the claims process with the intent to reduce valid claims to the smallest number possible.

Institutions are solicited to opt out of various class actions. Opt out proposals require careful analysis not only of the merits of the proposed complaint but also of the institutions’ own transactions. While the solicitation may be characterized as a “prudent way” to “maximize recovery,” following some of these proposals could place an institution at risk.

Institutions should also be aware of the various objections to settlements in which they may be class members. Some objections – if allowed – would enhance shareholder recovery. Others are without merit and drain the settlement fund.

Accordingly, we trust that this new “Class Action Recovery – Institutional Investors” blog will alert institutions to events in this developing landscape.

MINTZ LEVIN’S CLASS ACTION PRACTICE

Class actions are high-stakes, time-consuming, and costly, and they can present a substantial risk to the livelihood of your business. That’s why it’s critical to have defense counsel knowledgeable about and experienced in the specialized issues involved in these actions. Our national team has won landmark rulings and served as counsel in some of the largest multistate and stand-alone class actions. We combine substantive industry knowledge with procedural experience in class action defense, and have successfully defeated dozens of class certification motions.Read More